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Sold Foreign Shares While in India?

 

If the individual is not an NRI (i.e., he is a resident in India for tax purposes), then the taxability of capital gains from a foreign share buyback changes significantly. Here's a clear breakdown:

⚠️ If the person is a Resident in India (not an NRI):

✅ Capital gains from foreign share buyback ARE taxable in India.

💼 Why?

Under Section 5(1) of the Income-tax Act:

A resident's total income includes all income, whether earned in India or abroad.

So even if:

  • The shares are of a foreign company
  • The proceeds are received in a foreign bank account

👉 The global income (including foreign capital gains) of a resident is fully taxable in India.

📌 Tax Implications:

Particulars

Resident in India

Residential Status

Resident (Section 6)

Shares of Foreign Company

Capital asset held abroad

Income from Foreign Buyback

Taxable in India under Section 5(1)(c)

Tax Head

Capital Gains (Section 45 / 46A)

Foreign Tax Credit (if any)

Can be claimed under DTAA + Rule 128

Disclosure

Must report in Schedule FA (Foreign Assets) of ITR

🧾 Example:

Mr. A, resident in India, holds shares in Apple Inc., and Apple announces a buyback. Mr. A tenders shares and receives $10,000 directly in his U.S. bank account.

  • The $10,000 is capital gains income.
  • Even though the money never came to India, it is fully taxable in India.
  • Mr. A must report this in his ITR and pay capital gains tax (LTCG or STCG depending on period of holding).

🛡️ Practical Tips:

  • Maintain records of purchase cost, date, exchange rate, and buyback amount.
  • Report under Capital Gains schedule in ITR-2 or ITR-3.
  • If foreign tax was deducted (like U.S. withholding), you may claim foreign tax credit.

🚨 Non-Disclosure Consequences:

If you don’t disclose:

  • Penalty up to ₹10 lakh under Black Money Act
  • Prosecution risk for willful concealment

✅ Summary:

Resident Status

Taxable in India?

Under What Section?

Non-Resident (NRI)

❌ Generally No

Unless Explanation 5 of 9(1)(i) applies

Resident

✅ Yes

Section 5(1)(c), 45, 46A

 

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